Proven Tips to Refinance & Lower Your Interest Rate

If your current mortgage rate is higher than what new borrowers are getting, you're probably paying more than you need to.

That's the situation most people refinance to fix. You already own the property, you've been paying down the loan, and somewhere along the way the market moved or your lender stopped caring. The question is whether switching is worth the time and cost, and what you actually need to do to make it happen.

Why People in Terrigal Refinance to a Lower Rate

You refinance when the gap between your current rate and what's available elsewhere is wide enough to justify the switch. That usually means your rate is at least 0.5% higher than current offers, though the exact break-even depends on your loan size and how long you plan to stay in the property. In Terrigal, where property values have held up well and most homeowners have built solid equity, refinancing is often straightforward once you know your loan amount and current valuation.

Consider a borrower with $500,000 remaining on their loan at 6.2%. If they can refinance their home loan to 5.5%, that's a saving of around $290 a month, or close to $3,500 a year. Over five years, that adds up without factoring in what happens when you redirect those savings back into the loan or offset.

What Triggers a Rate Review

Most people look at refinancing when their fixed rate period ends and they roll onto a higher variable rate, or when they realise they haven't reviewed their loan in three or four years. If you're coming off a fixed rate and your new rate is noticeably higher, that's the clearest signal. You can check whether your fixed rate is expiring and what your options are without waiting for the lender to send a letter.

Another trigger is when you see ads or hear from friends that they're on a lower rate. Your lender isn't going to call and offer you a discount unprompted, so if you've been on the same loan for more than two years, it's worth checking what's available.

How the Application Actually Works

You apply through a broker or directly with a new lender. They assess your income, expenses, and credit file the same way they did when you first bought, though the process is usually faster because you already own the property. The new lender orders a valuation to confirm your equity, and if everything checks out, they prepare the loan documents and arrange settlement. Your old loan gets paid out, and the new loan starts.

The part that catches people out is timing. If you're still in a fixed rate period, there may be break costs. If your property has dropped in value or your income has changed, you might not qualify for the same loan amount. That's why it makes sense to run the numbers before you commit.

What You Pay to Switch

Refinancing costs include the application fee with the new lender, which is often waived, a valuation fee of around $200 to $300, and discharge fees from your current lender, usually $300 to $500. If you're switching from one variable loan to another, the total is usually under $1,000. If you're breaking a fixed rate early, the costs can be much higher depending on how much time is left and how much rates have moved.

You also need to factor in whether you're moving to a loan with an annual fee or a package fee. Some lenders charge $395 a year for access to lower rates and offset accounts. That's fine if the rate saving covers it, but if you're refinancing to save 0.3% on a $300,000 loan, a $395 annual fee might wipe out most of the gain.

What Happens with Offset Accounts and Redraw

If your current loan has an offset account with a balance sitting in it, that balance doesn't automatically move to the new loan. You'll need to transfer it yourself once the new loan settles. Same with redraw. If you've been making extra repayments and relying on redraw to access that money, you lose access to it when you refinance unless you specifically request a cash-out or structure the new loan to preserve that buffer.

Some borrowers in Terrigal refinance specifically to get an offset account because their current loan doesn't have one. If you're self-employed or your income fluctuates, having an offset can improve your cash flow without locking funds into the loan where they're harder to access.

Fixed or Variable After You Refinance

Once you refinance, you choose whether to go variable, fixed, or split. Variable gives you flexibility to make extra repayments and access features like offset and redraw without restriction. Fixed locks in your rate for one to five years, which protects you if rates rise but means you're stuck if they fall. A split lets you do both, which works if you want some certainty but don't want to commit the whole loan.

In practice, most people refinancing to a lower rate go variable because that's where the sharpest pricing is right now and because they want the flexibility to keep paying down the loan faster. If you're worried about rates moving up, you can split part of the loan and fix that portion while keeping the rest variable.

What to Do If You're Stuck on a High Rate

If you know your rate is too high but you're not sure whether you can refinance, the first step is a loan health check. That tells you what your current loan is costing, what's available, and whether your equity and income support a switch. If your property value has dropped or your income has changed, you might not qualify for a full refinance, but you can often negotiate with your current lender or wait until your position improves.

For homeowners in Terrigal who bought in the last few years, equity usually isn't the issue. The local market around The Skillion and North Terrigal has stayed strong, and most properties have held value or grown. The bigger question is whether your income still supports the loan amount and whether you have any credit issues that might slow down approval.

When Refinancing Doesn't Make Sense

Refinancing to save 0.2% on a $200,000 loan when you're planning to sell in the next year probably isn't worth it. The savings won't cover the cost and effort. Same if you're already on a competitive rate and the only reason you're switching is to chase a cashback offer. Cashback can be useful, but if it's the only reason you're moving and the ongoing rate is higher, you'll lose money over time.

You also want to avoid refinancing just because your current lender annoyed you. That's a valid reason to leave, but it shouldn't be the only one. Make sure the new loan is actually lower in cost and gives you what you need, not just a different logo.

If you're unsure whether refinancing makes sense for your situation or you want to see what rates you actually qualify for, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions